Platform:At the same time as struggling bank Citigroup reported that it had lost $9.8 billion (€6.7 billion) in the fourth quarter of 2007 and cut its dividend by 41 per cent, recently appointed chief executive Vikram Pandit announced the creation of a new position within the company: head of talent management, writes Sheila O'Flanagan.
This particular title has been buzzing its way around corporate bodies for some time. The difference (apparently) between talent management and human resource management is one of proactivity. Talent officers are supposed to ensure a continuous supply of highly productive individuals in the right place at the right time. Heaven knows what human resources (or personnel as it was more prosaically called a few decades ago) was meant to be doing, as the title suggests that having people in the right place at the right time would be part of the job description.
Citigroup continues to employ a head of human resources, which seems somewhat extravagant considering that the business review recently initiated by Pandit is set to result in thousands (or, depending on who you talk to, tens of thousands) of previously productive individuals being told that their services are no longer required.
Charles Prince III, the former chairman and chief executive, decided that his productive skills were past their sell-by date and so resigned last November before the board had the opportunity to fire him.
Pandit's review also includes a clampdown on expenses - last year Todd Thompson, head of wealth management, was fired after his expenses included installing a wood-burning fire on his 50th-floor office, as well as long-distance flights in the corporate jet with CNBC journalist Maria Bartiromo.
Clearly the gravy train that was the right of a highly productive Citigroup employee has ground to a halt outside Hairshirt Station.
Merrill Lynch posted a loss of almost $10 billion in the same period, which is its biggest quarterly loss since its foundation.
Merrill too has a new chairman, John Thain, who agreed that $10 billion was an unacceptable amount to lose. Thain replaced Stan O'Neal, who got the boot after reporting third-quarter losses of $8 billion.
Merrill is now hoping its talent management operations are on track too.
Rather belatedly, in addition to the talent officers and expenses tsars, the banks are also hiring risk management teams. They did, of course, have them before, but clearly they weren't sufficiently proactive in deciding what was considered risky. The new teams will doubtless come up with the blindingly obvious idea that lending money to people who can't repay it is now off limits and so is buying complex financial instruments that can't be accurately valued.
Wall Street is in a mess of its own making. Global financial markets in 2008 will continue to be dogged by the fear that has swamped the street since last August as the banks try to rebuild their balance sheets through investments from a variety of sources.
The Government of Singapore Investment Corporation now owns a chunk of Citigroup, as does Prince Alwaleed bin Talal of Saudi Arabia. (Oil at $100 a barrel being good news for some of us at least!)
The Kuwait Investment Authority has invested in Merrill along with the Korean Investment Group.
The investments help, but markets are more profoundly shaken than they've been for as long as I can remember.
The dotcom implosion was sectoral, the long-term capital management hedge fund crisis was contained, but the credit crunch has hit everybody.
It's not an easy time, either, for US Federal Reserve chairman Ben Bernanke, who has yet to acquire the experience of his predecessor, Alan Greenspan, or the blind faith of the industry practitioners.
Pronouncements from Bernanke don't soothe the moneymakers in the same way as Greenspan's did and a half-point cut in rates last September sparked only a temporary rally.
Bernanke's comments that he is ready to make further aggressive cuts and that he will support a package to stop a slowdown in the economy failed to calm the nerves.
The problem for the traders and the financiers is that they have lost confidence in their own abilities to assess risk. The short-term requirement of analysts and investors that the financial institutions increase their returns every quarter made attitudes to risk-reward ever-more ambivalent.
The leading banks were like a fleet of Titanics running at full steam ahead despite the fact that they were in dangerous waters. The belief that they and their products were unsinkable led them to ignore the danger signals even when hit head on.
Of course the captains, such as O'Neal and Prince, were able to paddle off in the lifeboats of hefty payoffs regardless of the sinking ships. The employees and the investors have, so far, not been as lucky.
www.sheilaoflanagan.net
